Latest news with #YorukBahceli
Gulf Today
4 days ago
- Business
- Gulf Today
France has become less attractive to foreign investors
Yoruk Bahceli and Leigh Thomas, Reuters France is missing out on the investor optimism that has defined Europe's markets this year, hamstrung by its strained public finances and political volatility that threatens to paralyse policy until at least 2027. Global investors and French executives cite the risk that budget negotiations could trigger another government collapse in the autumn, while pessimism among French households is dragging on consumer spending and economic growth. Centrist Prime Minister Francois Bayrou has faced eight no-confidence motions in parliament since taking office in December and his minority government is now struggling to find 40 billion euros ($47 billion) in spending cuts for the 2026 budget. The contrast with neighbouring Germany, whose new government is preparing to loosen historically tight purse strings and pump billions into the economy through defence and infrastructure spending, could hardly be starker. "While all the other highly indebted European countries — Greece, Portugal, Spain and Italy — have taken advantage of years of inflation to reduce their public debt ratio, France — whose deficit is now the highest in the euro zone — is increasingly diverging," said Pierre Moscovici, head of the Cour des Comptes public audit office and a former finance minister. To narrow the budget gap, Bayrou will have to convince opposition parties to stomach spending cuts only slightly smaller than those proposed in the 2025 budget that brought down his predecessor. Germany's historic embrace of looser fiscal policy and the impact of President Donald Trump's sometimes erratic policymaking on confidence in US assets have given a boost to European financial markets and other investments this year. A key beneficiary has been Italy, which has seen the risk premium paid on its 10-year debt compared to that of safe-haven Germany drop towards where it traded in 2010, before the euro zone debt crisis escalated. But the 10-year risk premium paid by French debt over German is still at 70 basis points, well above levels of around 50 bps seen before French President Emmanuel Macron called a shock snap election last summer. The French-Italian yield gap is meanwhile near all-time lows, even though Italy has a bigger debt pile. Candriam's chief investment officer Nicolas Forest said he favoured German, Italian and Spanish bonds and was underweight France, a situation he called "completely unusual". French stocks are missing out, too. The blue-chip CAC 40 index trades below where it was before the election was called and is lagging Europe's STOXX 600 aggregate. The Paris index has returned just 5% this year, four times less than Germany's DAX. Simon Blundell, co-head of fundamental European fixed income at BlackRock, the world's biggest investor, said he had no big positions in French debt and favoured Italian bonds, encouraged by political stability in Rome and declining volatility. Even if France's government survives the autumn, investors expect the budget squeeze to underwhelm as a fix for fiscal strains and so fail to increase the appeal of French assets. "Any compromise political parties find will be really temporary in terms of measures, and not great for debt reduction and deficit improvement," said Candriam's Forest. And even presidential and parliamentary elections in 2027 may not fully dispel the political uncertainty, if no party emerges dominant. To prod opposition parties to back Bayrou's budget, Public Finances Minister Amélie de Montchalin has suggested France could turn to an IMF bailout if it does not decisively grip its finances. Carrefour CEO Alexandre Bompard said such doomy talk only caused the French to save more, jeopardising a consumer spending recovery that he said was more fragile than in the supermarket giant's other European markets. "If we have 5 percentage points more savings than other European countries, it's because we have an extraordinarily high level of political and fiscal uncertainty," Bompard told an economics conference in Aix-en-Provence on Friday. With consumers hesitant to spend, French business activity has consistently lagged European peers this year, even though the private sector is less exposed to US trade tensions than Germany or Italy's more export-focused economies. Brushing aside any prospect of IMF intervention to prop up France's public finances, the Fund's French chief economist Pierre-Olivier Gourinchas insisted Paris could no longer put off getting its fiscal house in order. "France is not exempt from the laws of gravity, so we're going to have to adapt," Gourinchas said in Aix-en-Provence. "We can't fly, we're going to have to plan our landing and make spending cuts."
Mint
24-06-2025
- Business
- Mint
Central banks eye gold, euro, yuan as dollar dominance wanes
Gold seen as biggest winner from dollar diversification Euro seen top currency to benefit in short term - OMFIF survey Yuan favoured by central bankers over a longer time frame Reuters' sources see euro recovering some lost ground quickly By Yoruk Bahceli, Dhara Ranasinghe LONDON, June 24 (Reuters) - The custodians of trillions of dollars of global central bank reserves are eyeing a move away from the greenback into gold, the euro and China's yuan as the splintering of world trade and geopolitical upheaval spark a rethink of financial flows. According to a report by the Official Monetary and Financial Institutions Forum (OMFIF) due to be published later on Tuesday, one in three of 75 central banks managing a combined $5 trillion plan to increase exposure to gold over the next one-to-two years after stripping out those planning to decrease, the highest in at least five years. The survey -- carried out between March and May -- gives a first snapshot of the repercussions of U.S. President Donald Trump's April 2 Liberation Day tariffs that sparked market turmoil and a slide in the safe-haven dollar and U.S. Treasuries. Gold, which central banks have already been adding at a record pace, was seen benefiting even further longer term, with a net 40% of central banks planning to increase gold holdings over the next decade. "After years of record-high central bank gold purchases, reserve managers are doubling down on the precious metal," OMFIF said. The dollar, the most popular currency in last year's survey, fell to seventh place this year, OMFIF said, with 70% of those surveyed saying the U.S. political environment was discouraging them from investing in the dollar -- more than twice the share a year ago. In currencies, the euro and yuan stand to benefit the most from a diversification away from the dollar. A net 16% of central banks surveyed by OMFIF said they plan to increase euro holdings over the next 12 to 24 months, making it the most in-demand currency, up from 7% a year ago, followed by the yuan. But over the next decade, the yuan is more favoured, with a net 30% of central banks expecting to increase holdings and its share of global reserves seen tripling to 6%. Separately, three sources who deal directly with reserve managers, told Reuters they saw the euro as now having the potential to recapture the share of currency reserves lost following the 2011 euro debt crisis by the end of this decade. They cited more positive sentiment among reserve managers towards the euro following Liberation Day. That would mean a recovery to a roughly 25% share of currency reserves, from around 20% currently, representing a key moment in the bloc's recovery from the debt crisis that threatened the euro's existence. Max Castelli, head of global sovereign markets strategy and advice at UBS Asset Management, told Reuters that reserve managers made many calls after Liberation Day to ask if the dollar's safe-haven status was at risk. "As far as I remember, this question has never been asked before, not even after the great financial crisis in 2008." The average expectation for the dollar's share of global FX reserves in 2035 was 52%, the OMFIF survey showed, remaining the No.1 reserve currency but seen down from the current 58%. OMFIF survey respondents expected the euro to reach about a 22% share of global reserves in 10 years' time. "The euro's share of global reserves will almost surely rise over the next few years, not so much because Europe is viewed so much more favorably, but because the dollar's status is diminished," said Kenneth Rogoff, Harvard professor and former IMF chief economist, told Reuters by e-mail ahead of OMFIF's publication. But Europe could attract a higher share of reserves sooner if the bloc is able to boost its pile of bonds that are currently dwarfed by the $29 trillion U.S. Treasury market, while integrating its capital markets, the sources that speak directly to reserve managers, told Reuters. ECB President Christine Lagarde has also urged action to bolster the euro as a viable dollar alternative. The euro is the "only real alternative currency for the moment to make a significant change in the level of reserves," said Bernard Altschuler, global head of central bank coverage at HSBC, adding he saw it as "realistic" for the euro to reach a 25% share of global reserves in 2-3 years if those issues are addressed. The European Union is the world's largest trading bloc. Its economy is far bigger than the dollar's other rivals. Capital controls limit the appeal of the yuan. Momentum for change has gathered pace, with Europe signalling willingness to curb its dependence on the U.S. by boosting defence spending, including through more joint EU borrowing. Germany is ramping up spending, while the EU is trying to revive efforts to integrate its capital markets. Public pension and sovereign wealth funds, also surveyed by OMFIF, saw Germany as the most attractive developed market. UBS Asset Management's Castelli said he was receiving many more questions about the euro, estimating the euro could recover to a 25% share of reserves by the end of the 2020s. At the most bullish end, Francesco Papadia, who managed the ECB's market operations during the debt crisis, estimated the euro could recover to 25% in as soon as two years. Reserve managers he holds discussions with were more willing to look at the euro than before, Papadia, senior fellow at think-tank Bruegel, said. Zhou Xiaochuan, China's central bank chief from 2002 to 2018, agreed the euro's role as a reserve currency could grow. However, there's "homework to do," he told Reuters on the sidelines of a recent conference. (Reporting by Yoruk Bahceli and Dhara Ranasinghe in London, additional reporting by Jiaxing Li in Hong Kong, Leika Kihara in Tokyo and Emily Green in Mexico City; Editing by Elisa Martinuzzi and Anna Driver)
Yahoo
24-06-2025
- Business
- Yahoo
Exclusive-Central banks eye gold, euro, yuan as dollar dominance wanes
By Yoruk Bahceli and Dhara Ranasinghe LONDON (Reuters) -The custodians of trillions of dollars of global central bank reserves are eyeing a move away from the greenback into gold, the euro and China's yuan as the splintering of world trade and geopolitical upheaval spark a rethink of financial flows. According to a report by the Official Monetary and Financial Institutions Forum (OMFIF) due to be published later on Tuesday, one in three of 75 central banks managing a combined $5 trillion plan to increase exposure to gold over the next one-to-two years after stripping out those planning to decrease, the highest in at least five years. The survey -- carried out between March and May -- gives a first snapshot of the repercussions of U.S. President Donald Trump's April 2 Liberation Day tariffs that sparked market turmoil and a slide in the safe-haven dollar and U.S. Treasuries. Gold, which central banks have already been adding at a record pace, was seen benefiting even further longer term, with a net 40% of central banks planning to increase gold holdings over the next decade. "After years of record-high central bank gold purchases, reserve managers are doubling down on the precious metal," OMFIF said. The dollar, the most popular currency in last year's survey, fell to seventh place this year, OMFIF said, with 70% of those surveyed saying the U.S. political environment was discouraging them from investing in the dollar -- more than twice the share a year ago. In currencies, the euro and yuan stand to benefit the most from a diversification away from the dollar. A net 16% of central banks surveyed by OMFIF said they plan to increase euro holdings over the next 12 to 24 months, making it the most in-demand currency, up from 7% a year ago, followed by the yuan. But over the next decade, the yuan is more favoured, with a net 30% of central banks expecting to increase holdings and its share of global reserves seen tripling to 6%. Separately, three sources who deal directly with reserve managers, told Reuters they saw the euro as now having the potential to recapture the share of currency reserves lost following the 2011 euro debt crisis by the end of this decade. They cited more positive sentiment among reserve managers towards the euro following Liberation Day. That would mean a recovery to a roughly 25% share of currency reserves, from around 20% currently, representing a key moment in the bloc's recovery from the debt crisis that threatened the euro's existence. Max Castelli, head of global sovereign markets strategy and advice at UBS Asset Management, told Reuters that reserve managers made many calls after Liberation Day to ask if the dollar's safe-haven status was at risk. "As far as I remember, this question has never been asked before, not even after the great financial crisis in 2008." The average expectation for the dollar's share of global FX reserves in 2035 was 52%, the OMFIF survey showed, remaining the No.1 reserve currency but seen down from the current 58%. EURO'S MOMENT? OMFIF survey respondents expected the euro to reach about a 22% share of global reserves in 10 years' time. "The euro's share of global reserves will almost surely rise over the next few years, not so much because Europe is viewed so much more favorably, but because the dollar's status is diminished," said Kenneth Rogoff, Harvard professor and former IMF chief economist, told Reuters by e-mail ahead of OMFIF's publication. But Europe could attract a higher share of reserves sooner if the bloc is able to boost its pile of bonds that are currently dwarfed by the $29 trillion U.S. Treasury market, while integrating its capital markets, the sources that speak directly to reserve managers, told Reuters. ECB President Christine Lagarde has also urged action to bolster the euro as a viable dollar alternative. The euro is the "only real alternative currency for the moment to make a significant change in the level of reserves," said Bernard Altschuler, global head of central bank coverage at HSBC, adding he saw it as "realistic" for the euro to reach a 25% share of global reserves in 2-3 years if those issues are addressed. The European Union is the world's largest trading bloc. Its economy is far bigger than the dollar's other rivals. Capital controls limit the appeal of the yuan. Momentum for change has gathered pace, with Europe signalling willingness to curb its dependence on the U.S. by boosting defence spending, including through more joint EU borrowing. Germany is ramping up spending, while the EU is trying to revive efforts to integrate its capital markets. Public pension and sovereign wealth funds, also surveyed by OMFIF, saw Germany as the most attractive developed market. UBS Asset Management's Castelli said he was receiving many more questions about the euro, estimating the euro could recover to a 25% share of reserves by the end of the 2020s. At the most bullish end, Francesco Papadia, who managed the ECB's market operations during the debt crisis, estimated the euro could recover to 25% in as soon as two years. Reserve managers he holds discussions with were more willing to look at the euro than before, Papadia, senior fellow at think-tank Bruegel, said. Zhou Xiaochuan, China's central bank chief from 2002 to 2018, agreed the euro's role as a reserve currency could grow. However, there's "homework to do," he told Reuters on the sidelines of a recent conference.
Yahoo
29-05-2025
- Business
- Yahoo
Stocks, dollar rally as Trump tariffs hit court roadblock
By Yoruk Bahceli and Wayne Cole LONDON/SYDNEY (Reuters) -European stocks and Wall Street futures rose on Thursday after a U.S. federal court blocked President Donald Trump's so-called "Liberation Day" tariffs from going into effect, sending the dollar up on safe-haven currencies. The little-known Manhattan-based Court of International Trade ruled that Trump overstepped his authority by imposing his April 2 across-the-board duties on imports from U.S. trading partners. The White House quickly appealed the decision, and could take it all the way to the Supreme Court if needed. But in the meantime, it offered some hope that Trump might back away from the highest tariff levels he had threatened. "The ruling has brought a temporary sense of relief to the markets, even as uncertainty lingers over whether the administration will fully comply," said James Leong, chief executive officer at Grasshopper Asia. "While volatility has eased for now, the lack of clarity around the government's response could reignite market turbulence. Until the Supreme Court provides a definitive ruling, we're unlikely to see a lasting resolution," he added. The ruling could also encourage U.S. trading partners to stall any trade negotiations they are having with the White House while they wait to see how the case is resolved. However, analysts at Goldman Sachs noted the order does not block sectoral levies, and there were other legal avenues for Trump to impose across-the-board and country-specific tariffs. "This ruling represents a setback for the administration's tariff plans and increases uncertainty but might not change the final outcome for most major U.S. trading partners," analyst Alec Phillips wrote in a note. Europe's STOXX 600 index was up 0.3% in early London trade. U.S. markets looked primed for a stronger reaction with S&P 500 futures last up 1.6%. Nasdaq futures were up 2%, also benefiting from relief over earnings from Nvidia, which beat sales estimates. But Britain's FTSE 100 index shrugged off the news and was last down 0.1%. "Is this a sign that stock markets in countries who did manage to score trade deals with the US in recent weeks, could be at a disadvantage if tariffs are reversed? This could be a short-term theme to watch," said Kathleen Brooks, research director at XTB. Britain was the first country to secure a trade deal with the U.S. and will hold talks with Washington next week to speed up the implementation of that deal, the Financial Times reported. Earlier in Asia, Japan's Nikkei rose 1.9%, while South Korean shares climbed 1.9% to a nine-month high. Chinese blue chips firmed 0.6%. SAFE HAVENS TAKE A BACKSEAT The news of the court decision hit traditional safe-haven currencies, which have benefitted from tariff fears punishing the U.S. dollar. The dollar gained nearly 1% against the Japanese yen. It later eased and but remained up 0.3%. The dollar was, meanwhile, up 0.4% against the Swiss franc. Another beneficiary of dollar woes, the euro dropped as much as 0.7% and was last down 0.2% against the greenback. U.S. Treasury yields rose, adding to the pressure on the market unnerved by Trump's hefty tax and spend bill, which passed the House of Representatives last week. Yields on 10-year Treasuries, which move inversely with prices, were up 4 basis points to 4.52% and markets further shaved the chance of a Federal Reserve rate cut anytime soon. Longer-dated, 30-year yields held above the closely-watched 5% level. Minutes of the last Fed meeting showed "almost all participants commented on the risk that inflation could prove to be more persistent than expected" due to Trump's tariffs. A rate cut in July is now seen as around a 20% chance, while September has come in at around 60%, having been more than fully priced a month ago. In commodity markets, gold was down 0.2% to $3,283 an ounce. [GOL/] Oil prices extended a rally first begun on supply concerns as OPEC+ agreed to leave its output policy unchanged and the U.S. barred Chevron from exporting Venezuelan crude. [O/R] Brent rose $1 to $65.9 a barrel, while U.S. crude rose similarly to $62.84 per barrel. (Additional reporting by Ankur Banerjee in Singapore, Stella Qiu in Sydney and Summer Zhen in Hong Kong; Editing by Sam Holmes, Lincoln Feast and Joe Bavier) Error in retrieving data Sign in to access your portfolio Error in retrieving data Error in retrieving data Error in retrieving data Error in retrieving data
Yahoo
17-04-2025
- Business
- Yahoo
Analysis-Markets see door wide open for more ECB rate cuts on tariff hit
By Yoruk Bahceli and Dhara Ranasinghe LONDON (Reuters) - Traders saw the all-clear on Thursday from the European Central Bank to bet on even steeper interest rate cuts ahead, confident the central bank will ease policy further if trade tensions dent a fragile economy. The ECB cut rates by 25 basis points (bps) for a seventh time this cycle to 2.25%, to bolster an already struggling euro zone economy facing a large hit from U.S. tariffs that have whipsawed markets since President Donald Trump's April 2 reciprocal tariffs. The euro weakened and government bond yields across the bloc fell sharply as traders reacted to the dovish ECB message. It stressed a deteriorating growth outlook due to trade tensions that have sparked "exceptional uncertainty" and removed a reference to rates being "restrictive" from its policy statement. The latter would normally be seen hinting at slower cuts, but came as a relief as ECB chief Christine Lagarde explained, assessing the bank's policy stance against an unobservable neutral rate would be "meaningless" during an economic shock. The decision was unanimous, while a few weeks ago several governors would have argued for a pause, Lagarde said, a sign of how seriously policymakers take the risks to the economy. All of that "suggests the ECB is willing to do what is needed," said Barclays's head of euro rates strategy Rohan Khanna. Traders now see over a 70% chance of a June rate cut, up from roughly 60% before the ECB's decision, according to LSEG data. By year-end they see nearly 65 bps of rate cuts, up from nearly 55 before the decision, meaning they now reckon three rate cuts rather than two are more likely by then. Contrast that with less than a full chance of another move this year and the pricing in of a chance of a 2026 hike after the March meeting, as investors bet on Germany's historic fiscal overhaul boosting economic growth and inflation. German two-year bonds yields, sensitive to monetary policy expectations, dropped as much as 7 bps and Italian equivalents fell to their lowest since 2022. Bond yields move inversely with prices. WHAT INFLATION? While the impact of tariffs on inflation looks less clear than on growth, hefty market moves since Trump's latest tariff announcement point to further disinflation. The euro, which neared parity against the dollar in February, has surged over 9% to around $1.136 since the start of March, which will contain import costs. It trades at an all-time high on a trade-weighted basis. Oil meanwhile has slumped nearly 10% this month and China, the biggest source of EU imports, is taking the biggest hit from tariffs. Markets have parked aside any concerns around inflation, with a key gauge of long-term expectations the ECB also tracks showing inflation right at the ECB's 2% target. That's down from 2.2% in March. Some economists stress the risk that inflation will fall below the ECB's target. Citi, for example, said ahead of the ECB meeting that it sees price growth at 1.6% next year and 1.8% in 2027. That's a potential headache for the ECB which struggled for years with below target inflation before the COVID-19 pandemic. A wide range of estimates on the ECB rate outlook speaks to the scale of uncertainty, which could keep euro zone markets volatile. Indeed, some ECB policymakers see a high chance of a further interest rate cut in June but others are far from deciding before seeing more economic indicators, sources told Reuters. In markets, some analysts reckon pricing had gone far enough. Steve Ryder, portfolio manager at Aviva Investors, said markets expectations now reflected the downside risk to ECB rates, so the firm was now neutral on European bonds, while Nordea expects the ECB to cut rates just once more to 2%. Barclays, however expects the ECB to cut rates to 1.25% by October, delivering more cuts than markets anticipate. And Frederik Ducrozet, head of macroeconomic research at Pictet Wealth Management, said while a recession was not his baseline scenario, if one did materialise it would require a bigger response. "Now you can imagine the ECB cutting 100 bps this year but hiking next year," he added. Sign in to access your portfolio
